Must a printer collect sales tax when it separately bills its customers for typesetting and plates that become the customer's property after a printing job?

Plain-English summary

Crisray Printing Corp. prints drug and pharmaceutical labels. To do so it buys typesetting and plates from an outside source. On the first job for a customer it bills the typesetting and plates separately; those items become the customer's property when the invoice is paid, though the printer keeps physical possession for future printing orders. It asked whether it must collect sales tax on those typesetting and plate charges.

The Department held the printer must collect tax — the typesetting and plates are a retail sale of tangible personal property — unless the customer provides a certificate.

• Retail sale. Section § 1105(a) taxes receipts from retail sales of tangible personal property, and a "retail sale" (§ 1101(b)(4)) is a sale for any purpose other than resale or certain uses with taxable services. Selling the typesetting and plates to the customer (after using them to fill the printing order) is a retail sale, so the printer must collect tax at the time of payment.
• Certificate exception (§ 1132(c)). No tax is due if the customer gives a properly completed certificate showing the customer is an exempt organization, or that the property is bought for resale or for an exempt use.
• The production-use exemption (§ 1115(a)(12)). That section exempts property bought "for use or consumption directly and predominantly in the production of tangible personal property … for sale, by manufacturing …." So if the customer buys the typesetting and plates for use — by itself, the printer, or anyone else — directly and predominantly in producing tangible personal property for sale (including the printer's production of the labels for sale to a customer who in turn buys them for resale), the customer may buy them without tax by giving the printer a properly completed Exempt Use Certificate (Form ST-121) — except New York City tax if the sale takes place within the City. See 20 NYCRR 528.13(c)(5).

What this means for you

Selling the tooling is a taxable sale. Typesetting, plates, dies, and similar items are tangible personal property. Once they become your customer's property, billing for them is a taxable retail sale — collect tax at payment — even though you keep them on your shelf for reruns.

A certificate is what turns off the tax. Tax stops only if the customer hands you a valid § 1132(c) certificate — exempt-organization, resale, or exempt-use. Without one, you must collect.

Production use can exempt the tooling — with Form ST-121. If your customer buys the plates to use directly and predominantly in producing goods for sale (including your producing the printed goods for a customer who buys them for resale), a properly completed Exempt Use Certificate (Form ST-121) exempts the sale — but New York City tax still applies if the sale is in the City.

Common questions

Q: I separately bill my customers for plates and typesetting. Do I charge tax?
A: Yes, when those items become the customer's property that's a taxable retail sale — collect tax at payment — unless the customer gives you a valid certificate.

Q: My customer keeps the plates with me for future runs. Does that change anything?
A: No. Title passed to the customer, so it's a sale. Physical possession staying with you doesn't defeat the tax.

Q: How can the plates be sold tax-free?
A: The customer gives you a § 1132(c) certificate — exempt organization, resale, or (for production use under § 1115(a)(12)) an Exempt Use Certificate, Form ST-121. Note New York City tax still applies to a City sale.

Citations and references

Statutes:

• Tax Law § 1105(a) — tax on retail sales of tangible personal property
• Tax Law § 1101(b)(4) — "retail sale" excludes sales for resale
• Tax Law § 1132(c) — exemption/resale certificate relieving the vendor of collecting tax
• Tax Law § 1115(a)(12) — exemption for property used directly and predominantly in producing tangible personal property for sale

Regulations / forms:

• 20 NYCRR § 528.13(c)(5) — Exempt Use Certificate for production machinery and equipment
• Form ST-121 — Exempt Use Certificate (note: does not cover New York City tax on a City sale)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1982.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a82_23s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-82(23)S
Sales Tax
July 15, 1982

Taxpayer Services Division
Technical Services Bureau
STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S810630B

On June 30, 1981, a Petition for Advisory Opinion was received from Crisray Printing Corp.,
154 E. Merrick Road, Freeport, New York 11520.
The issue raised is whether Petitioner is required to collect sales tax on charges to customers
for typesetting and plates used by Petitioner in the printing of pharmaceutical labels for its
customers.
Petitioner is engaged in the business of printing drug and pharmaceutical labels. To produce
these labels Petitioner purchases typesetting and plates from an outside source. When Petitioner
performs the initial job for the customer, Petitioner charges separately for the typesetting and plates
on the billing to the customer. Petitioner further states that the typesetting and plates become the
property of the customer upon payment of the invoice, and that Petitioner retains possession of the
typesetting and plates for future printing orders.
Section 1105(a) of the Tax Law imposes a tax on the receipts from retail sales of tangible
personal property. The term "retail sale" is defined as a sale for any purpose other than for resale or
for certain uses in conjunction with the rendering of certain taxable services. Tax Law, § 1101(b)(4).
In the present instance Petitioner's sale of typesetting and plates to its customer subsequent to its use
in the fulfillment of a printing order constitutes a retail sale of tangible personal property. The
receipts from such sales are subject to tax and Petitioner is required to collect such tax at the time
of payment by its customer. An exception to this requirement would arise where its customer
presented Petitioner with a properly completed certificate, as provided for under section 1132(c) of
the Tax Law, indicating either that the customer is an exempt organization or that the property is
being purchased either for resale or for an exempt use. Section 1115(a)(12) of the Tax Law describes
such an exempt use, providing for an exemption from sales tax with respect to the purchase of
equipment purchased "for use or consumption directly and predominantly in the production of
tangible personal property . . . for sale, by manufacturing . . . ." Where its customer purchases the
typesetting and plates for use, whether by itself, Petitioner or any other entity, directly and
predominantly in the production of tangible personal property for sale (including the production of
labels by Petitioner for sale to such customer, where such customer purchases the same for re-sale),
the customer may make such purchase (i.e., of the typesetting & plates) without the payment of tax
(except for the New York City tax, if the sale takes place within New York City), if at the time of
sale it supplies Petitioner with a properly completed Exempt Use Certificate, Form ST-121. See in
this regard 20 NYCRR 528.13(c)(5).
DATED: June 30, 1982

JAMES H. TULLY., COMMISSIONER
TP-8 (4/80)

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau
LOUIS M. JACOBSON, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR